Typically your home or business premises are one of the biggest investments that one will make in their lifetime. Unfortunately, I regularly encounter policyholders who don’t have the correct insurance policy in place, or the correct level of insurance coverage for a property that they own.
In many instances or most cases, little or no consideration is given to the intricacies of the policy, the correct setting of sums insured/value at risk, and in the event of a claim this can leave policyholders thousands, tens or hundreds of thousands out of pocket.
How to avoid being out of pocket in the event of a claim?
At the time of taking out or renewing an insurance policy, it’s typically left up to policyholders to set and declare the sums insured for buildings and contents. Your insurance companies insurance underwriter will price the risk and set the policy premium based on the information, you the policyholder has provided to them. (The onus is on the policyholder or homeowner to supply this information to the insurance company).
When you have a claim in your home, your insurance company will send out a loss adjuster to investigate the claim, take photos, measurements etc, relating to the claim itself and also check to confirm that all the conditions, endorsements and warranties have been complied with.
One of the other roles of the loss adjuster is to measure the building and environs to ensure that the sums insured are adequate, in line with the Society of Chartered Surveyors Ireland rebuild cost calculator. If the value at risk is found to be more than the sum insured, average will apply. Meaning that if you are found to be 25% underinsured, 25% will be deducted from your claim payment, as you are deemed to be self-insured for the % portion, that you are underinsured by.
Very important to get to know the size of the building and use the calculator to correctly assess the correct level of cover. Underinsurance is a common cause of reduced claims. It’s critically important to know the size and rebuilding cost of your building.
Use the SCSI house rebuild cost calculator
Why it is important to answer your insurer’s questions honestly and carefully
Under the Consumer Insurance Contracts Act 2019, you must answer your insurer’s specific questions honestly and with reasonable care, both when you take out the policy and at renewal, and tell them about any changes the policy asks you to report. If you do not, a claim may be reduced or refused.
Your policy may have conditions you must comply with, for example setting your alarm, fitting locks to a set standard or keeping smoke alarms working. If you don’t comply, the insurer may be able to reduce or refuse a claim connected with the breach. Reading through an insurance policy can be hard going, but it is vitally important to read through your policy schedule and determine what conditions, warranties, endorsements apply, and decipher how to comply with the aforementioned conditions, warranties and endorsements.
Not all policies are the same and the old adage applies “you get what you pay for”, so be careful what insurance policy you select and don’t just base on price. If you know someone in the insurance industry, ask them to read through and get their advice.
How to avoid buying the wrong insurance policy for your needs? (Probably the most important tip)
Speak to your insurance broker or insurer about the cover you need, and go through the policy with them. A good broker will be a friendly face and will be able to assist you when you have a query, or even help when you have a small claim. They may even pop out to your property and measure your building and advise on sums insured etc.
Whichever policy you choose, ask for the exclusions, conditions and limits to be explained before you sign, and keep your policy documents somewhere safe in case you need to claim.